If you’re looking at the $80 trillion promised by the Great Wealth Transfer and wondering what it could do for your personal finances, you’re not alone. Governments are asking themselves the same thing, according to UBS.
The staggering sums received in the coming decades through inheritance will change the financial situation of millions of people. But it could also help correct the fiscal trajectories of some of the world’s most developed countries. These funds, says UBS, could be used to balance the balance sheets of countries with high levels of unsustainable public debt.
Studies have shown that over the next 20-30 years, $124 trillion will pass from older generations to younger ones. Baby boomers — people born between 1946 and 1964 — are the wealthiest generation in history. As these individuals begin to transition, the amounts will immediately go to their Gen X, Millennial, and Gen Z successors, and some of the money will go to spouses.
But UBS chief economist Paul Donovan believes governments will want to add their names to the recipient list. He said: “Our UBS modeling shows that more than $80 trillion of wealth will change hands over the next 20 years.
“The changes in wealth are occurring at a time when many governments around the world have high debt and deficits. It seems unrealistic to assume that governments will simply sit back while this wealth moves. We expect that governments will try to mobilize this wealth to help finance their debt, but in doing so, it denies the private sector access to some of these funds.”
Indeed, a study by JPMorgan earlier this month found that women who expect to receive inheritances from their spouses in the coming years — an expected sum of $9 trillion — plan to invest it in the stock market. Part of the reason they’re comfortable investing is that they’re not dependent on it to meet their financial goals, with three out of four women saying they’re well on their way to achieving financial milestones without receiving any inheritance from family or a spouse.
The very fact that women would have power over such sums has implications for the real economy, Donovan added: “Women invest differently than men. On average, women tend to be much less emotional investors: they do more research, and when they do invest, they tend to stick with investments for the long term. This means that longer-term, more complex investment projects in the real world may face less the cost of capital in the future, and women will become the new owners of wealth.”
Much attention is paid to the budget deficit of the US, the world’s largest economy. Economists are worried not so much about the size of the national debt, which recently reached $38 trillion, but how quickly it is piling up borrowing costs with no sign of spending slowing.